How to Analyze a Potential Real Estate Market for Crime & Safety

Crime rates are an important indicator to analyze when looking for an investment property. Buying in a high crime area can be risky not only to you, but also to your investment. We’ve certainly known a few A/C condensers to mysteriously grow legs and walk off.

Not only can crime cost property owners through thefts and break-ins, but high crime generally reduces the values of properties in a given area. A study from the Center for American Progress, for example, found that a 10 percent reduction in homicides resulted in an 0.83 percent increase in housing values the following year.

This is not to say that you can’t make money in areas with higher crime. Indeed, we have a good number of investments in areas with a relatively high crime rate. There are still plenty of good people in those areas that you can make money renting or selling to.

But the important thing is to know what you are getting into in the first place. The worse thing you can do is buy in a high crime area when you think it is a low crime area — which leads to the first key thing to do before you start investing.

1. Decide What Areas You Want to Invest In

The “close your eyes and throw a dart at the stocks section of the newspaper” is not a particularly effective strategy. (OK, maybe it is for stocks, but not for real estate.)

If you don’t know what you’re looking for, you’ll never find it. It is important up front to decide what kind of risk tolerance you have and what types of areas you are willing to invest in. Do you want to go into luxury housing, Section 8 housing, middle-class housing, etc.? The riches are in the niches, so it’s usually unwise to bounce around aimlessly. With regard to crime, the question is, “How high a crime rate are you willing to tolerate?” You need to answer this question ahead of time.

2. Crime Websites

Once you’ve decided on what kind of areas you are looking to invest in, you can start to research them. The first place to look is online.

Unfortunately, these sites only break down that information by zip code, and zip codes can be rather large. Sometimes parts of a zip code will have a high crime rate, and other parts will have a low crime rate.

City-Data.com, on the other hand, has a mapping feature that can give you much more specific information.

Image via City-Data.com

Unfortunately, while this feature can give you a subdivision by subdivision account of median income, it only has crime data by zip code.

3. Crime Mapping Websites

It’s probably worth looking at these sites, although I have always been a bit suspicious of them. For one, they just show a map with reported crimes dotting it, which makes it hard to compare one area to another. Second, I’m not confident that all of the relevant data has been obtained and is being shown. So while I think these maps are worth looking at, I wouldn’t make any decisions based solely on them.

4. Driving the Neighborhood

Google Earth is a fantastic tool, but I would caution against using it to draw conclusions about a neighborhood. A still frame picture usually makes a place look better than it actually is. For one, if an area is dilapidated, it very well may smell bad, and you can’t detect a stench from a picture. Trash blowing in the wind or troublemakers loitering about also doesn’t come through very well in one picture.

In the end, there’s simply no comparison to actually being there. Even if you want to invest from out-of-state (something you should be very careful doing, by the way) you should go to wherever you want to invest first. Driving around a neighborhood can give you a very good feel for how good and how safe it is.

Things to look for include:

Vacant, boarded up buildings (if they are boarded up, that likely means the owner is afraid they will be robbed)

Many burnt or seriously dilapidated buildings that aren’t being repaired

Cages around A/C condensers

Bars on windows or doors

Trash on the streets

Lots of graffiti

Etc.

Also make sure to stop by a local convenience store or two and look to see if the cashier is behind Plexiglas. That will tell you a lot.

If you want even more information, drive around at night and see if it’s calm and people are walking their dogs or going for a jog or if it’s either completely empty (people likely nervous to go out) or very rowdy (people likely causing trouble).

5. Talking to the Neighbors

The people who know the most about a neighborhood are the ones who live there. Many of them would just love to talk your ear off about their experiences or about kids these days. Don’t be shy in asking the neighbors how they like living in the area or how safe they think it is.

Just be prepared to get an earful.

6. Other Investors and Property Managers

If you aren’t attending your local real estate club, you should start. Same goes for any property manager groups in your city. These are some of the best people to ask what it is like owning properties and how bad the crime is in different parts of town. The BiggerPockets Forums are a good place to ask that as well.

7. The Police

Police departments can be a great source of information on various areas, particularly if you are looking to buy an apartment building. Many police departments will give you a list of the calls they’ve had on any apartment if you request it. So if you are evaluating an apartment in an area you think it s a bit questionable, this is absolutely something you should do.

In addition, many police departments allow for citizens to do ride-alongs. In Kansas City, MO, for example, residents can apply to do a ride-along once a year. This is a great way to see what exactly the police are dealing with in your city, and there’s no better person’s brain to pick regarding crime than a police officer. And, by the way, if you know any police officers, you should definitely ask them what they think about any given area as well.

Conclusion

Again, it’s important to remember that a higher crime rate doesn’t necessarily mean it’s off limits to invest in. But what is critical is to know what you are getting into before you get into it. The above tools should allow you to determine the crime rate of any given area and to go into any investment there with your eyes open.

How do you analyze markets for crime? Any additional tools you use?

Let me know with a comment!

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7 Comments

Believe it or not, many police departments will discipline officers who “speak candidly” about neighborhoods to potential buyers. City council members become very hostile when police officers speak truthfully about crime issues in their districts and scream very loudly at police chiefs when this happens. Police officers are actually prohibited to speak to the media without specific departmental approval because city administrators absolutely hate it when police officers talk to citizens about crime occurring in the neighborhood.

Police departments will send you to the crime analysis office (clueless clerks and analysts) where they will print a map for you detailing which crimes occurred and where. Obviously, “crime stats” don’t tell the whole story. Frequently they tell hardly any of the story…

All of this local governmental suppression of information was prompted by homeowners and INVESTORS who fly into a rage when a “buyer” says, “Well, I talked to a cop who was driving down your street and he said that this is a high crime and gang activity area.”…

So Please, if you ask a police officer about a house, street or neighborhood, and he gives you an answer, please do not present that information to the seller. The seller will run straight to his city councilman, who will run straight to the chief of police who will immediately initiate steps to punish the officer. This will occur 100% of the time.

But there is a way around this bureaucratic mess…. Find a police officer working that neighborhood who is 50 years of age or older. He is not worried about “departmental discipline” and will very likely give you good, factual information. Keep in mind however,that generally speaking, police officers do not live in marginal areas and tend to view areas with even sparse issues as “poop-holes.” <— I used the "nice" word here.

I was a street cop in North Long Beach CA (Long Beach Blvd/69th street) for over a decade. I know the difference between "Violent" and "Poor".

As part of my due diligence, I visit a property on consecutive Friday and Saturday nights at midnight. I sit in my car, in the darkness, for thirty minutes. I watch and I listen. And of course I visit the property multiple times during the day during the work week. And I watch and I listen. This is very basic stuff. (and part of the reason that Turn Key makes absolutely no sense to me)

This doesn’t really surprise me these days, although we haven’t had any problems getting them to give us a list of calls to the police for any given apartment, at least in KC. As far as asking an officer for their opinions, it probably has to be someone you know personally.

Great article. I already use CityData and will have to check out the other sites mentioned.

Another person you can ask besides the police are mail carriers. They drive every road, block, street every day. They see it all! I’ve stopped a few mailmen/mailwomen before and asked them for a few minutes of their time. They were happy to help me learn more about the area.

Another useful site for crime mapping is Trulia. Based on the heat maps I have seen for areas I know about, it seems to be fairly accurate and appears to be granular down to the block. Of course nothing can replace physically visiting an area, but it helps identify some obvious bad and good areas.

Be careful not to completely rule out a area due to these types of maps. Many of the “bad” areas I see highlighted are commercial areas where there are much higher rates of crime due to shoplifting, etc. but these would not necessarily be representative of the crime in the nearby neighborhoods. Additionally some cities have nicer neighborhoods in close proximity to not so nice neighborhoods, many time separated by some geographical divide, a river, a highway, train tracks, etc.

One thing I look for in the Google street view is are there chain link fences (high or low) around the front of the properties. That tends to be a dead giveaway.

One seller was super open and let me talk to his former PM (she had retired a few months earlier and I was told she was a great PM). Super nice lady and aside from learning about the neighborhood she also threw me gems about managing properties.

I had solid prior knowledge about the street/area and she confirmed it.